November 13, 2008

Subject: Comment file No S7-14-08

11/13/08

SEC
RE: file s7-14-08; oversight of indexed annuity sales

I am a member of the Financial Planning Association and have been a practicing financial planner for 24 years. I support the proposed rule.

Consumers do not understand annuities, and even less so a complex product like an indexed annuity. They are not clear on terms, and most are not aware of the surrender charges. The elderly are especially vulnerable to being sold an unsuitable product, since most sales agents play to their fears of outliving income.

I have a client who was sold five annuities when she was in her late thirties. They are all poor products in my opinion, but because of surrender charges, she would lose many thousands of dollars if they were replaced with a better product. This is an intelligent woman, but she was not aware of the surrender charges. Additionally, long term illiquid annuities were unsuitable for this person at her age and with her long term needs.

I have seen several elderly clients, new to my practice, who came burdened with three and four annuities each. They were sold these products with the promise of lifetime income. The amount of potential income was never disclosed, and the products will never come anywhere close to providing the needed income.

Indexed annuities are sold with the illusion that they will provide good positive return, but avoid the losses that might be realized in direct ownership of stocks or other alternative investments. In fact I have clients in indexed annuities - already owned at the time we began our working relationship - who have realized losses in the recent market declines.

Indexed annuities are complex products. I do not fully understand their functioning myself even though I have made a study of them. The sales of these products should be regulated in the same way that any other security is regulated.

Claudia Fitch, CFP®, EA
President, Financial Planning Association of San Francisco Managing Principal Fitch Financial Advisors LLC